Mr. Blowfish opened a seafood store in December. He borrowed $60,000 from a bank at an annual interest rate of 8 percent. He used the funds he borrowed to purchase $60,000 of capital equipment. Over the year, he rented a building for $50,000 a year. During the first year of operation, Blowfish paid $45,000 to his employees, $20,000 for utilities, and $25,000 for raw fish he bought from other firms. In December of the next year, the market value of his capital was $50,000. Blowfish's best alternative to running the seafood store is to work for a grocery store as a sales clerk for $20,000 a year.
a) What is the economic depreciation of Blowfish's capital?
b) What are Blowfish's total opportunity costs?
c) What is Blowfish's economic profit?

Question

Quizplus · Accepted Answer

The Answer of Mr. Blowfish opened a seafood store in December. He borrowed $60,000 from a bank at an annual interest rate of 8 percent. He used the funds he borrowed to purchase $60,000 of capital equipment. Over the year, he rented a building for $50,000 a year. During the first year of operation, Blowfish paid $45,000 to his employees, $20,000 for utilities, and $25,000 for raw fish he bought from other firms. In December of the next year, the market value of his capital was $50,000. Blowfish's best alternative to running the seafood store is to work for a grocery store as a sales clerk for $20,000 a year.
a) What is the economic depreciation of Blowfish's capital?
b) What are Blowfish's total opportunity costs?
c) What is Blowfish's economic profit?

Mr Blowfish Opened a Seafood Store in December